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A classic stock-picking strategy called "growth at a reasonable price," or GARP, calls for finding companies whose stock valuations look low compared with their long-term growth rates. That's simple and sensible, and seemingly perfect at a moment when the market is hitting new highs. But there are problems with the approach, not least of which is a shortage at the moment of cheap growers.

A third problem is measurement. GARP investors often rely heavily on the "PEG ratio," which divides a stock's price/earnings ratio by Wall Street's long-term earnings-growth forecasts to tell which stocks offer good growth potential for the money. But long-term forecasts are often stale or otherwise unreliable;
Appleaapl -1.5351744876157316%Apple Inc.U.S.: NasdaqUSD124.43
-1.94-1.5351744876157316%
/Date(1427835600323-0500)/
Volume (Delayed 15m)
:
40410221AFTER HOURSUSD124.61
0.1799999999999930.14465964799485653%
Volume (Delayed 15m)
:
1632872
P/E Ratio
16.657295850066934Market Cap
736073426681.742
Dividend Yield
1.5108896568351684% Rev. per Employee
2153110More quote details and news »aaplinYour ValueYour ChangeShort position
(AAPL) is still forecast to lift earnings by more than 20% a year over the next five years, even though its earnings fell 18% last quarter.

The key to this strategy is to look for companies experiencing midlife growth spurts. Those can occur because of things like new hit products, talented new management, or external factors, and investors who spot them early can get a good deal on shares. Data screens for things like accelerating sales growth can help in spotting such opportunities, but so can a keen eye following a particular industry. We collected the names below from analysts who have recently been named top stockpickers in the Best on the Street rankings published by The Wall Street Journal.

Conn's sells home furnishings, electronics, and appliances through a small store chain located mostly in Texas. It specializes in customers with limited cash and less-than-perfect credit; some 70% of sales use in-store financing. That model helps protect the company from price competition from the likes of
Amazon.comamzn -0.66472676793294%Amazon.com Inc.U.S.: NasdaqUSD372.1
-2.49-0.66472676793294%
/Date(1427835600307-0500)/
Volume (Delayed 15m)
:
2354772AFTER HOURSUSD372.65
0.5499999999999540.14780972856758937%
Volume (Delayed 15m)
:
150848
P/E Ratio
N/AMarket Cap
173953601865.354
Dividend Yield
N/ARev. per Employee
577469More quote details and news »amzninYour ValueYour ChangeShort position
(AMZN), and the loan interest adds to profit. It can also add bank-like risk, but lately, average credit scores for the company's loan portfolio have been rising, and the percentage of loans needing extensions has fallen. Conn's is benefiting from a turnaround in housing and from store remodels; it has converted storage space in some stores to 25% more selling space for high-margin items with good momentum, like mattresses. It has closed underperforming stores opened during a past, unsuccessful foray into upscale markets, and now wants to focus growth in its core middle-income markets. The store count could triple or quadruple over the long term, and so could earnings, says Bradley Thomas of KeyBanc, who calls the stock a top pick.

Health care isn't a growth hot spot at the moment. The jobless are forgoing doctor visits, while cost pressures are bringing prices down. But BioScrip stands to benefit from a coming wave of complex medicines to treat diseases like cancer, and from efforts to reduce costly hospital stays. Most drugs already on the market are taken orally, but a majority of ones awaiting Food and Drug Administration approval require injection, according to Jefferies analyst Brian Tanquilut. BioScrip specializes in providing drug-infusion therapies in patient homes rather than in hospitals, which saves health insurers money. Sales for the business have recently been growing more than 20%. BioScrip is expected to swing to profitability this year, and lift profits quickly from a small base, including a more than 50% bump up next year.

JDS UNIPHASE MAKES a broad range of communications equipment used by wireless and broadband companies. Sales and earnings aren't growing at the moment because of a lull in spending by wireless companies, but demand for data traffic continues to build. That means growth should resume soon. Sales gains should top 10% in both 2014 and 2015, accompanied by a rise in profit margins, according to James Moorman at S&P Capital IQ. One particularly promising area for the company, he says, is the increased use of "small cell" infrastructure to fill in gaps in high-speed wireless coverage. By placing communications gear on existing infrastructure, including sports arenas, office buildings, and traffic lights in city centers, carriers can increase coverage at low cost.

POPEYES, THE CAJUN chicken chain, is making a comeback, and shares of parent AFC Enterprises have doubled in two years. There could be plenty more growth ahead. New management has closed underperforming stores and introduced popular new menu items (Rip'n Chick'n), but most important, it has rolled out basic restaurant tactics the company lacked, like measuring the speed of drive-through service, and using national rather than local ad campaigns. Sales are rising by double digits, and Michael Gallo at CL King sees potential for much more growth. "Chicken concepts travel well to overseas markets, and so does spicy food," he says. Popeyes has significantly fewer stores in the U.S. than KFC, and less than 5% as many overseas. Its franchise model means it can grow on the cheap. Gallo reckons each 100 new stores adds 20 to 25 cents to earnings per share.

Poised for a Jump in Profits

Earnings for these four companies should begin growing faster, giving shares a lift.

Company/Ticker

Recent Price

Price/ Earnings*

Comment

AFC Ent/AFCE

$33.35

24.0

Popeyes' turnaround should yield strong overseas growth.

JDS Uniphase/JDSU

13.17

23.5

Sales should get a lift next year as wireless spending picks up.

BioScrip/BIOS

13.60

43.9

Demand for home infusion is growing as complex drugs come to market.

Conn's/CONN

48.14

19.2

Benefiting from a housing recovery; plenty of potential to expand.

*Based on forecast EPS for current fiscal year Source: Thomson Reuters